When it comes to giving form to your dream of starting your own entrepreneurial venture, you may face some hiccups, especially with respect to finding financial assistance. Whether you need money to set up shop, or to fund the growing needs of your start-up, it may not be possible for you to spend all the money from your already shrunken pockets. It is at this time that you might feel the need to borrow the necessary funds. Of course, borrowing from friends or family is an option, but considering that you may or may not be able to repay the money in a single or a few chunks, it is best for you to opt for a formal loan such as a Business Loan or a Personal Loan.
While it may be your first instinct to opt for a Business Loan, for obvious reasons, you may be surprised to know that it will be much easier for you to fulfil the Personal Loan Eligibility. Business Loans often need you to furnish proof of the existence of your business, in addition to proving that it generates a somewhat steady flow of revenues. Besides, you may also need to explain the loan officer, the precise reason for which you want the funds, and how do you plan on reaping the amount from the business. All of this may not be possible for you, especially if your business idea is still in the nascent stages and you don’t have much to show for the prospective success of the same.
Personal Loan applications, on the other hand, simply need you to furnish proof of your identity and your age along with a proof of steady income. More often than not, any leading bank of the nation would provide you with a Personal Loan in light of just these documents, accompanied by your dependable repayment history. And not only this, Personal Loan for business expenses offers a wide array of advantages such as:
When taking out this loan, you won’t be obliged to disclose the use of the acquired funds to the bank. You can use it to taken care of your operating expenses, to buy inventory, to distribute salaries, or even to pay yourself. This freedom of use takes away a tremendous burden off your shoulders and gives you the much-needed independence to run your enterprise in the way you deem fit.
For you to avail a Business Loan, you must have at least 2 to 3 years of financial statements to prove the stability of your business, which is not the case with Personal Loan eligibility. Whether your business idea is just budding in your mind, or it has been up and running for less than a quarter, you can easily take a Personal Loan to meet the financial obligations of your business regardless of its stage.
Owing to the minimal documentation involved, Personal Loans often get approved in less than 24 hours, as against Business Loans which may take anywhere between 30 and 90 days to get sanctioned. Then again, the loan disbursal in case of the former takes a mere 2-4 days, making the process extremely simple, quick and dependable, especially in case of urgent need of funds.
Yes, this is one of the most crucial advantages of getting a Personal Loan for business. In the initial phases, you may not have a valuable asset that you could possibly offer as collateral. In such a case, an unsecured Personal Loan can prove to be your best bet. While defaulting on the repayment will adversely impact your credit score, your assets won’t be seized, which in itself is a great incentive to opt for this incredible credit type.
All said and done, even Personal Loans have some limitations, such as the maximum amount that you are allowed to borrow. In most cases, the upper limit is usually Rs. 25 Lakhs, which may be even less in some cases such as SBI Bank Personal Loan where the loan amount is restricted to twelve times your monthly income. Besides, Personal Loans often incur high interest rates which may vary anywhere between 11% and 22%, which makes this credit option competitively expensive than its counterparts.
Now that you know the positives as well as the negatives of opting for Personal Loans for your business expenses, we recommend you take a call based on your individual situation. While Personal Loans seem as a ‘one size fits all solution’, it may or may not be the case for you!
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